PRESENTATION ON

VENTURE
CAPITAL
VENTURE CAPITAL
Venture capital is a form of equity financing
especially designed for funding high risk
and high reward projects with the objective
of earning a high rate of return.
1.It promoted by technically or professionally
qualified but unproven entrepreneur
2. It seeking to harness commercially
unproven technology
3. High risk venture
 Venture capital means funds made available
for startup firms and small businesses with
exceptional growth potential.

 Venture capital is money provided by professionals who

alongside management invest in young, rapidly growing
companies that have the potential to develop into
significant economic contributors.
Venture Capitalists generally:

• Finance new and rapidly growing companies

• Purchase equity securities

• Assist in the development of new products or services

• Add value to the company through active participation.

 The SEBI has defined Venture Capital Fund
in its Regulation 1996 as ‘a fund established
in the form of a company or trust which
raises money through loans, donations, issue
of securities or units as the case may be and
makes or proposes to make investments in
accordance with the regulations’.
• Long time horizon

• Lack of liquidity

• High risk

• Equity participation

• Participation in management
• It injects long term equity finance which provides a solid
capital base for future growth.

• The venture capitalist is a business partner, sharing both

the risks and rewards. Venture capitalists are rewarded
by business success and the capital gain.

• The venture capitalist is able to provide practical advice

and assistance to the company based on past experience
with other companies which were in similar situations.
 The venture capitalist also has a network of contacts in many
areas that can add value to the company.

 The venture capitalist may be capable of providing additional

rounds of funding should it be required to finance growth.

 Venture capitalists are experienced in the process of preparing

a company for an initial public offering (IPO) of its shares onto
the stock exchanges or overseas stock exchange such as
NASDAQ.
They can also facilitate a trade sale.
Features of Venture Capital
 High Degrees of Risk
 Equity Participation
 Long term Investment
 Participation in Management
 Achieve social objectives
 Investment is Illiquid
 Types of Venture Capital
 Funds set up by angel investors.
 Subsidies of Corporation
 Private capital firms/funds
Modes of finance by venture capital
1.EQUITY
2.CONDITIONAL LOAN
3.CONVERTIBLE LOAN
1. Seed Money:
Low level financing needed to prove a new idea.
2. Start-up:
Early stage firms that need funding for expenses
associated with marketing and product development.
3. First-Round:
Early sales and manufacturing funds.
4. Second-Round:
Working capital for early stage companies that are
selling product, but not yet turning a profit .
5. Third-Round:
Also called Mezzanine financing, this is
expansion money for a newly profitable
company
6. Fourth-Round:
Also called bridge financing, it is intended
to finance the "going public" process
 STAGES OF FINANCING
 A. EARLY STAGE FINANCING
Seed capital and research and development projects
Start ups
Second Round Finance
B. LATER STAGE FINANCING
Development Capital, expansion finance, replacement
capital, turn around, Buy outs
Procedure followed by VCs
 Receipt of Proposal
 Appraisal of Plan
 Investment
 Provide Value added Services
 Exit
THANKS